March 13, 1998
MR. PRESIDENT, MR. SPEAKER AND HONORABLE MEMBERS OF THE LOUISIANA LEGISLATURE:
Presented, herewith, is my budget recommendation for the fiscal year beginning July 1, 1998. It has been prepared in accordance with the Constitution and applicable statutes and provides financial and program information to assist you in making informed decisions as you consider appropriations for the coming year. In accordance with Article VII, Section 11 of the Constitution, I will prepare the original general appropriation bill in conformity with this document.
I am hopeful this smaller published document will be of greater practical use to you than the huge Executive Budget document printed in the past. Its relative brevity is possible because of changes made by Act 1403 of 1997. A document equivalent in size and scope to that formerly published as the Executive Budget is now available on the Internet. It should be easier to use in the electronic format than it was on paper due to "point and click" capability for moving among its sections. In addition, it has greater accessibility as its details are available to anyone using a computer with Internet browsing capability.
Pursuant to Act 1465 of 1997, the performance data reflected in both this Executive Budget and its supporting document is much better than in the past. In addition, the original general appropriations bill will, for the first time, include key objectives for the programs of state government. Since the strategic planning provisions of Act 1465 will be implemented by the end of Fiscal Year 1997-98, next year's Executive Budget, supporting document and appropriations bill will include even better planning and performance information.
As in my first two budgets, this proposal continues my commitment to propose spending which relies on no new taxes. I will, however, seek to continue the existing tax base. Accordingly, my recommendations contain supplementary recommendations which will be funded upon renewal of the three cents sales tax on food, utilities and other traditionally exempt items set to expire June 30, 1998. The $340 million the renewal is projected to generate is recommended for a limited number of items as detailed herein. I consider these supplementary recommendations a separate submission, but have included them in my total recommendation in the interest of clarity. They are clearly identified as supplementary recommendations in the limited number of sections where they appear. The "temporary" taxes represented by the exemptions suspension base have, in varying degrees, been part of our budget for over a decade. Their temporary nature has made the preparation and presentation of a budget in those years they are set to expire unnecessarily confusing and often alarming. Because I consider the renewal of this base absolutely essential, I am not placing an undue emphasis on the spending items associated with them. Should anyone disagree with the necessity of this revenue source, I believe they should look at the entire budget rather than focus on these items.
As expected, our revenue growth has moderated from the exceptional performance experienced in recent years. As a matter of fact, the year to year growth in general fund revenues between the current and next year is about 2.2%, contrasted with growth rates ranging between 6% and 10% in recent prior years. Growth in Fiscal Year 1999-2000 is currently projected at only 2.7%, largely due to a substantial reduction in projected video poker revenue that year. Therefore, if we expect to maintain our current revenue base, it will be important to continue limiting expenditure growth.
As we began preparation of this budget, $145 million in additional general fund was projected to fund the current expenditure base. When the Revenue Estimating Conference met on February 18, 1998, an additional $17 million was adopted for a total increase of some $162 million. It was essential that I include the following major general fund expenditure increases in this budget proposal:
These items alone total more than the general fund revenue increase. However, I have also included the following increases, which I also consider of critical importance:
The essential and critical items above total over $224 million and this is not a comprehensive listing of all additions. As always, other areas of the budget required additional funding for the provision of adequate services in light of increased workloads and existing pressures. My base recommendations include no general fund cash capital outlay proposals. These totaled $63.5 million in the current year, so nonrecurring them was largely responsible for our ability to balance increased spending with increased revenues. However, additional cuts were made in recurring expenditures and most state agencies and departments are again expected to live within their current means with regard to providing funding for normal spending growth factors such as inflation and pay increases.
In addition to renewal of the existing tax base, I will also propose utilization of part of the prior year surplus in next year's budget. The Fiscal Year 1996-1997 Undesignated General Fund Balance per the state's Comprehensive Annual Financial Report is a positive $135 million. I am proposing utilization of this balance for the defeasance of $145.1 million in General Obligation Bond debt over a four year period beginning in Fiscal Year 1998-99. Doing so will not only save some $10 million, but will also trend our debt service payments over the period so they do not fluctuate dramatically as projected in the current debt service schedule - such wide variances in these requirements make budgetary planning all the more difficult. The debt service savings which will result from this plan are as follows:
I will propose expenditure of the entire $59.7 million Fiscal Year 1998-99 savings in the Capital Outlay budget for the following purposes:
As you will recall, $35 million in general fund was appropriated for the overlay program in a supplemental capital outlay appropriations bill last year. I would have preferred matching or increasing that amount next year since the backlog of needs in the overlay program is at least $1.3 billion. That same supplemental bill appropriated $30 million to continue to address major repair needs in institutions of higher education. The backlog of these needs remains at no less than $60 million. $31 million was provided to address similar needs in other state buildings. The backlog of state buildings needs remains at no less than $85 million. Therefore, the rationale for making these expenditures is clear. Of equal importance from a purely budgetary standpoint, these capital costs do not automatically lock us into recurring expenditures.
Although I am pleased to be able to propose spending measures which will continue our progress in education and other areas, perhaps the best news in this budget is its lack of emphasis on funding needs in our Medicaid payments program. Although $34.4 million is required in additional general fund, the overall cost of the program is maintained at virtually the current year level - you will note a bottom line total budget increase in this $3.2 billion program of only $1.9 million. Given the fact that Medicaid has represented a monumental funding problem for us over the past several years, it is remarkable that it represents so little of our budget pressure for the coming year. This is a testament to the department's management and to your willingness to work with us, particularly last year, to bring this tremendous budgetary problem under control.
I am also proud of the extent to which we have been able to limit the growth in the number of state employees. This proposal reflects a reduction of 219 authorized positions from the current fiscal year level. Authorized positions and the actual number of state employees on the payroll differ significantly, however. For example, authorized positions do not include some 28,000 employees at higher education, nor do they include temporary employees. We consider the number of employees actually on the payroll the best measure of state employment. The Office of Planning and Budget has measured the number of employees on the payroll as of December 31 each year for the past 10 years utilizing State Department of Civil Service data. That measurement shows that while the Roemer administration added 4,163 employees to the payroll and the most recent Edwards administration added 7,218, our administration has added a net of only 161 as of December 31, 1997. Despite the necessity of adding employees in higher education, corrections, public safety, state parks and elsewhere, I still hope to achieve an overall net reduction in state employees by the end of this term.
I hope I have successfully provided you with a broad overview of my spending recommendations in this letter. Much greater detail is contained in this document and in its supporting document available to you electronically (http://doa.louisiana.gov/opb/opb.htm). We look forward to working with you as you consider this budget. We are closer to achieving budgetary stability than we have been in over a decade. Our continued focus on the future implications of our annual budget decisions will keep us on the right path.
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